Guiding the Shift from Volume to Value in Medicare Payments

Congress has before it a bill that would move Medicare away from fee-for-service, and a new health policy issue brief from the Engelberg Center for Health Care Reform at the Brookings Institution has outlined specific modifications that would enable to legislation to support better care and more value in Medicare.

While Congress had agreed last year in principle on legislation that moves away from FFS, and repeals the sustainable growth rate, the bill stalled over a disagreement in how to pay for the payment reforms. While the paper does not address the issue of paying for the legislation, the authors do note that some of the proposals could offset part of the costs of the legislation.

Co-author Mark McClellan, senior fellow and director of the Health Care Innovation and Value Initiative at the Brookings Institution, explained that suggestions like eliminating site of service payment differentials and more clarity around what constitutes an effective alternative payment model and qualifies for a bonus, would help ensure efforts lead to a reduction of cost while improving care.

But he is clear that while these proposals will help offset some cost, they won’t come anywhere close to the full $150 billion cost of payment reform. He suggests a semi-permanent fix to repeal the sustainable growth rate that lasts maybe 3 to 5 years while implementing the other payment reforms that would actually be saving money at the same time.

“It wouldn’t be a permanent fix, but it would mean the next time Congress comes back to this, first it would be further down the road, and second physicians would be in a much stronger place for actually getting to better care and a better payment system,” Dr McClellan said.

The Brookings Institution’s healthcare policy brief comes just days after HHS released its goals and timeline to move Medicare payments away from the current fee-for-service (FFS) model to a value-based payment system.

“The devil will be in the details,” said co-author Michael E. Chernew, PhD, professor in the department of Health Care Policy at Harvard Medical School and co-editor of The American Journal of Managed Care. “And the paper that we released today begins to sketch out what we believe are some helpful suggestions regarding that transition.”

The paper’s recommendations fall into 3 main categories: Encouraging the movement to effective alternative payment models; improving Medicare’s physician FFS payment system; and improving and simplifying the quality measures used in alternative payment models and the new Merit-based Incentive Payment System.

The paper also calls for Congress to reform FFS payments even while the legislation would be looking to replace the current system. This is because there will likely still be some aspects of the FFS payment model under the new system, according to Dr Chernew, so reforming FFS is important.

“A well-designed FFS payment system can help physicians move toward alternative, more effective payment and delivery models when they are available,” the authors wrote.